Newspaper article The Christian Science Monitor

Financing the Post Office Privately. BUDGET. Some in Congress and the White House Are Proposing to Take It off the Government Budget

Newspaper article The Christian Science Monitor

Financing the Post Office Privately. BUDGET. Some in Congress and the White House Are Proposing to Take It off the Government Budget

Article excerpt

FOR years, Wall Street has hungrily eyed the United States Postal Service. The post office has everything a borrower could need: name recognition, a huge cash flow, and a thirst for money.

But Mr. Zip Code had no trouble borrowing money from Uncle Sam. That may now be changing.

Last Friday, congressional budget negotiators and the White House proposed to take the Postal Service out of the federal budget, pending unspecified reforms. One of the reforms almost always cited by the Reagan administration when it wanted to do the same thing was to have the Postal Service borrow privately.

If the Postal Service goes to Wall Street for its financing, it could ultimately cost Postal Service users more money in the way of rate increases. Similar quasi-governmental agencies typically pay an extra 50 to 75 basis points, or one-half to three-fourths of a percent when they borrow on their own. This could increase the cost of the Postal Service's five-year $13 billion capital expenditure program by $65 million to $97.5 million annually.

Since it would cost the post office more to borrow from Wall Street, the agency would also seek to modify its investment restrictions - permitting it to become more aggressive with its surplus cash. Thus, it might make up some of the lost revenues with higher investment income.

Although the Postal Service says it has no current active program to shift to the private credit markets, Colmer Coppie, senior assistant postmaster general for finance, says, "We are not opposed to it under the appropriate circumstances." This would please such investment banking firms as Salomon Brothers Inc. and Merrill Lynch & Co., who regularly visit postal officials to make presentations. The bankers would generate new fees with the post office as a client.

The Postal Service currently borrows money from the Federal Financing Bank (FFB), an off-budget arm of the US Treasury. The Postal Service issues securities, which the FFB buys, giving the post office an interest rate that is slightly more than it costs the US Treasury to borrow. The FFB gets its funding from the US Treasury.

The post office's capital spending plans are extensive. …

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